I’m also having this exact same issue. Mac Mini non unibody (2009?) running with a DVI to HDMI adapter. Sharp Aquos 46” tv. My resolution isn’t blurry or shakey, the screen just appears larger and the dock icons are partially off the screen. Please post if you find a fix
I updated my Mac mini 2009, hooked up to my 1080p TV via DVI-HDMI converter, to Mountain Lion a few days ago and see the exactly the same issue.
Every time the TV turns off and on, the screen resolution gets reset to 1080i, and dock icons and menu bar is chopped off. I have to reset to 1080p (or Best for display) every time. It is frustrating.